Short Sale Even if You are Current on Your Mortgage?

You may be able to execute a short sale on your home even if you are current on your mortgage loan, if your loan is owned or guaranteed by Freddie Mac or Fannie Mae. The Federal Housing Finance Agency has created new guidelines which went into effect on November 1, 2012. According to the FHFA acting director, “these new guidelines demonstrate FHFA’s and Fannie Mae’s and Freddie Mac’s commitment to enhancing and streamlining processes to avoid foreclosure and stabilize communities….” The timing on this is interesting, since FHFA has recently come under attack by other government agencies for refusing to allow Fannie Mae and Freddie Mac loans to be subject to the National Mortgage Settlement.

The intent of the new guidelines is to allow eligible borrowers, specifically including those with certain recognized hardships, to participate in a short sale with their mortgage servicer without that servicer having to go back to Fannie Mae or Freddie Mac for specific and individual approval. In other words, if a borrower meets the guidelines, approval by Fannie Mae and Freddie Mac should be considered to already be in place.

The new short sale guidelines issued with regard to Fannie Mae and Freddie Mac loans should allow the following:

a streamlined short sale approach for the borrowers most in need;

enable servicers to quickly and easily to qualify who are current on their mortgages for short sales;

a waiver of the right to pursue deficiency judgments in exchange for financial contributions when a borrower has sufficient income or assets to make cash contributions or sign promissory notes;

special treatment for military personnel with Permanent Change of Station orders;

consolidate existing short sale programs into a single uniform program;

provide servicers and borrowers clarity on processing a short sale when a foreclosure sale is pending; and

an offer up to $6,000 by Fannie Mae and Freddie Mac will to second lien holders to expedite a short sale.

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